Will the Indian used car market see a price correction anytime soon?

I personally feel that this market is unsustainable. My guess is, this is primarily because of easier access to financing, better salaries, and more black money.

BHPian wheelspinner recently shared this with other enthusiasts.

After a long hiatus, I'm back to Team-BHP to do some research. So, I'm finally trying to buy my first car. People have advised me against buying a new one as it is better to learn driving in a used car (I did learn driving when I got my license but have forgotten because I never owned a car!).

However, after endlessly scrolling through classifieds sections in Olx, and other marketplaces I'm very disappointed. For reference, when I joined the forum back in 2019, used cars were sold at attractive prices. For example, in 2019, a 5 month old Swift ZXI+ was priced at 5.4L at True Value, at a 2L discount with the dealer giving me further discounts. In stark contrast, I'm unable to find a 2019 ZXI+ at the above price in good condition after 4 years! The situation is so bad that even 10 year old well maintained Swifts are demanding 3L! Why are the prices so absurd?

I personally feel that this market is unsustainable. My guess is, this is primarily because of easier access to financing, better salaries, and more black money (I've heard that most used car deals are done partially in cash).

Eventually the supply will outpace the demand as interest rates increase, and financing becomes less feasible. This would cause a bubble burst. Is that scenario likely and are you willing to wait till then to make a purchase?

What do you think?

This is not a bubble, it will be an ongoing trend like the real estate market

Eventually the bubble will burst, and prices will go back to normal as dealers will have lots of leftover inventories

Here's what BHPian anoopvk268 had to say on the matter:

I am not sure where you are from, but the used car prices are absurd in Bangalore. As you said it is very similar to the real estate scenario. People are ready to pay astronomical rents, so the owners are asking even higher.

Here's what BHPian androdev had to say on the matter:

1. 10 years back budget cars were not exciting or choice was very limited. Income levels were also not so great across the board.

2. Income levels started going up (marginally, esp in metros) but around this time Uber and Ola started offering great services discouraging private car purchases.

3. COVID happened and people without personal cars experienced great inconvenience and insecurity - I am sure many prioritised buying a car above all else.

4. Ola and Uber, etc have become horrible, most certainly not a sensible option any more for frequent use.

5. All the premium and fancy features are being offered in budget/mass market cars - customers never had it so good when it comes to being excited by the features and options.

Obviously, all this applies to a small % of India's vast population, so not a reflection of the country overall.

Something similar can be said about real estate. The same demographic as above is seeing a lot of value in buying a small apartment in large gated apartment projects - which is where most of the housing action is taking place.

I think the demand from this demographic will only intensify. Not a reflection of the country overall, but a small section of the country that is likely to benefit from few things going well for Indian economy.

I recently sold my 2017 model Zeta Baleno ran 50k KM for just 2 lakhs less than what i paid for 6 years ago!

Here's what BHPian 2000rpm had to say on the matter:

Used car market is gonna sustain at current prices, because the alternatives are very expensive.

A decent new car today is atleast 9 to 10 lakhs on-road.

The government has not done any favours to the car industry with all the taxes.

Here's what BHPian smarcat had to say on the matter:

Most of the time, the seller is still getting a bad deal. Only the buyer is paying the higher price. The difference is being swallowed by the used car dealer. Now this is not exactly unfair nor it is profit gouging - the used car dealer has to maintain inventory of cars, which locks up capital. Further, he has other overheads like showroom expenses & sales/evaluators salaries.

I think there has been a big drop in direct transactions between sellers and buyers. That's because both buyers and sellers are preferring to take the dealer route.

From seller point of view:

• When you put up an ad in classifieds, you are bombarded with low-ball offers from used car dealers
• You get home visits from intermediaries (who "look" like genuine buyers) who waste your time taking test drives, after which another low-ball offer is made. These guys then sell it to dealers at a higher price for a quick Rs. 5k profit.
• Dealing with genuine buyers too needs time, patience & negotiation skills.
• After the deal is done, the seller has to follow up to ensure that registration transfer has been made.

From buyer of point of view:

• Most of the ads in classifieds are by dealers
• Genuine sellers inflate the asking price (because they know people will quote a lower price)
• It is a pain to travel all the way to other end of the city to see the car. On a weekend, you can see 2 or 3 cars at best. But if you approach a dealer, you have a wider variety of cars to choose from. This is super convenient.
• Buyer has to visit RTO to get registration work done, which might need multiple visits.
• Easy access to finance when you go to used car dealers.

Here's what BHPian audioholic had to say on the matter:

So the basic logic is new car prices going through the roof. And this resale value story is valid only for popular cars. We got our Celerio in 2016 for roughly 6.25L. I'm getting easily 4.25L without bargain a whole seven years and 75k kms later and the vehicle being battered all over.

That's only 2L of depreciation translating to 28k per year or roughly 2400 per month. Now where are those who favor cabs to owning a car?

For now I dont think it's a bubble waiting to burst, until this era of cars go bust and the price hikes stop. Until then, its a lottery for current car owners especially if you have a Maruti, Hyundai and the like. Multiple factors playing in their favour with a good demand from tier 2 and below areas as well.

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